Ucloudlink Group Inc (UCL) 2025 Q2 法說會逐字稿

Good day, and welcome to the Ucloudlink second-quarter 2025 conference call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Mr. Daniel Gao. Please go ahead, sir.

Hello, everyone, and thank you for joining us on Ucloudlink's second-quarter 2025 earnings call. The earnings release and our earnings presentation are now available on our IR website at ir.ucloudlink.com. Joining me on today's call are Mr. Zhiping Peng, Co-Founder and Chairman of the Board of Directors; Mr. Chaohui Chen, Co-Founder, Director, and Chief Executive Officer; and Mr. Yimeng Shi, Chief Financial Officer.

Mr. Chen will begin with an overview of our recent business highlights. Mr. Shi will then discuss our financial and operational highlights for the quarter. They will all be available to take your questions in the Q&A section that follows.

Before we proceed, please note that this call may contain forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties, and other factors not under the company's control, which may cause actual results, performance, or achievements of the company to be materially different from the results, performance, or expectations implied by these forward-looking statements. All forward-looking statements are expressly qualified in their entity by the cautionary statements, risk factors, and the details of the company's filings with the SEC. The company does not assume any obligation to reverse or update any forward-looking statements as a result of new information, future events, change in market conditions, or otherwise, except as required by law.

Please also note that Ucloudlink's earnings press release and this conference call include discussions of unaudited GAAP financial information and unaudited non-GAAP financial measures. Ucloudlink's press release contains a reconciliation of the unaudited non-GAAP measures to their most directly comparable unaudited GAAP measures.

I will now turn the call over to Mr. Chen. Please go ahead.

Thank you, Daniel, and good morning or evening, everyone. We are accelerating three transformative growth lines, GlocalMe Life, led by PetPhone; GlocalMe SIM, powered by eSIM TRIO; and GlocalMe IoT, through focused investment in R&D, go-to-market capabilities, and brand building to drive sustainable margin expansion while simultaneously strengthening our legacy GlocalMe mobile broadband business line by proactively offsetting tariff impact through strategic supply chain adjustments. Throughout this expansion, we maintain financial health as our foundation, ensuring disciplined investments, drive sustainable profitability and laying a solid foundation for sustainable long-term value creation.

Our GlocalMe ecosystem continues to gain traction and growth momentum. Our business remains profitable and continues to generate a stable margin with total revenue of $19.4 million and net income of $0.7 million during the quarter. Our 1.0 international data connectivity services business continues to grow with full speed 5G network coverage across 86 countries and regions as we continue to consolidate market share, especially in Mainland China, and strengthen our leadership position in the global roaming sector.

Our substantial strategic investments focused on R&D and marketing for our next-generation products to ensure they drive growth and improve our performance once launched. The development, refinement, and testing of this product progressed smoothly with several major distribution partners as we build a robust pipeline and enter the final stages of commercialization. Feedback has been overwhelmingly positive, reflecting how our solutions directly address the market demand and have validated our investment strategy. This has set the stage for the launch of several groundbreaking products in the near future.

In this quarter's earnings release, we have introduced a new metric, average monthly active terminals, MAT. Our three new product lines, GlocalMe Life, GlocalMe SIM, and GlocalMe IoT, demonstrated remarkable MAT growth of 105.2%, 120.1%, and 789.0% (sic) [791.0%] year-over-year, respectively.

I will now review highlights for each of our key business lines. I will start with GlocalMe Life business line, the upcoming commercial launch of the PetPhone where we already have over 20 potential strategic partners lined up, and we launched the brand in several countries in the third quarter of year [2025]. In Hong Kong, we are collaborating with a premier telecommunications service operator to launch PetPhone, making a significant expansion in our global market research, and the rollout of a powerful win-win cooperation model. This allows operators to monetize premium subscriptions, acquire high-value pet-owning customers, and diversify their revenue streams through our value-add services.

Our technology amplifies their market research and their infrastructure accelerates our scale. We also made substantial (inaudible) with a leading global online pet retailer to further enhance PetPhone's accessibility and market penetration within a short time. Alongside PetPhone, our industry-first UniCord Plus and UniCord Pro series, which are highly competitive, innovative, and pioneering products, integrating seamless connectivity across multiple networks, 6-Tech global positioning, and fast charging capabilities. We will further strengthen our competitive edge in the travel, automotive, and secure networking markets.

Commercial application of our GlocalMe IoT solutions also continues to gain strong momentum, with user adoption growing over 10 times year-over-year after nearly three years of commercialization efforts.

As revenue contribution increased, entering a new phase of accelerated growth, beyond core connectivity revenue, we are also diversifying monetization through value-added services. We enable China's top manufacturers to accelerate their global expansion through customized IoT connectivity solutions. Strategic partner with more industry leaders in the battery, monitoring, dashcams, vehicle infotainment, and smart security camera sectors are accelerating our expansion into high-growth verticals, further solidifying IoT as a key pillar for our business.

Turning to our GlocalMe SIM business line. Our success isn't an accident. It is a result of a successful business evolution. We have already sold over 300,000 OTA SIM and eSIM units since year 2024, outperforming competitors in the baseline segments. We achieved top ranking market share in our outbounding travelers of Mainland China, traveling to Hong Kong, Macau, Japan, Korea. This operational maturity positions us distinctly from market entrants.

Building on this foundation, eSIM TRIO represents our second-mover advantage realized. While competitors remain focused on the legacy SIM or eSIM technologies, we have advanced to redefine industry standards through this innovation. eSIM TRIO has been recognized as a transformative solution, receiving the top MWC Innovation Award from the SlashGear. Its groundbreaking capabilities generating significant industry attention at both Mobile World Congress 2025 in Barcelona and MVNOs World Congress 2025 in Vienna. Our comprehensive marketing campaign for eSIM TRIO, executed in a partnership with top media outlets, substantially increased its market visibility and exposure.

We are synergistically addressing two critical pain points for the industry with this product. First, as the ultimate permanent secondary SIM for consumers, it ensures seamless global coverage by dynamically connecting to multiple networks, eliminating the need for costly international roaming and providing users with reliable high-speed connectivity across devices.

Secondly, through our carrier co-issuance program, we solved a critical pain point for operators, especially Tier 2, Tier 3 mobile network operators and mobile virtual operators by upgrading their network performance and global roaming capabilities without the need for infrastructure investment and funding power.

With nearly 1,000 trial units distributed, strong user feedback, key breakthroughs in carrier partnership programs, and sample card production and testing with multiple operators scheduled for next quarter, we are poised to begin large-scale commercial deployment during the third quarter with strong confidence.

Lastly, our GlocalMe mobile fixed broadband business line. We pilot-launched the upgraded MeowGo G40 Pro late in the second quarter, which support speeds 3 times faster than traditional 4G devices. It's the world's first enabled in-flight WiFi and connects to Wi-Fi networks across several application scenarios such as home, airport, office, and cafes.

With MeowGo G40 Pro, we are transforming portable connectivity from international travel-only solution to a true multi-scenario company with our patented AI HyperConn technologies, seamlessly serving users through a single intelligent device and one account regardless where they are.

Furthermore, in the third quarter, we will launch the MeowGo G50 Max with the Sky-to-Ground 5G satellite integration and AI-driven network switching, further solidifying our innovative leadership in the mobile fixed broadband industry. This device enhanced network quality through AI-powered real-time congestion detection and network reselecting.

In summary, we are ideally positioned to capitalize our strategy and operational momentum. Despite trade and macroeconomic headwinds, we remain committed to executing our strategic R&D and marketing investment for new products while sustaining a healthy financial performance. These three products from our core business line, GlocalMe SIM led by eSIM TRIO, GlocalMe Life led by PetPhone, and GlocalMe IoT, have all achieved successful transformation in the second quarter, laying a solid foundation for future growth with the potential to reach multimillion of users in the future.

Our diversified product portfolio provides multiple pathways for us to drive growth throughout the remainder of the years as we scale up our user base and build a comprehensive global market data traffic sharing marketplace. We are confident that we have the right strategy in place to generate sustainable growth in the coming quarters.

For the third quarter of year 2025, we expect total revenue to be between $22.0 million to $26 million, representing a decrease of 12.7% to an increase of 3.2% compared to the same period of the year 2024. The company currently expects its revenue from the full year of the 2025 to be in the range of $85 million to $95 million, as compared with a range between $95 million to $130 million as previously announced.

The company is revising its guidance in light of the present macroeconomic challenges and the global trade headwinds, which have had and may continue to have a broader impact across the industries.

Now I will turn the call over to Mr. Shi.

Thank you, Mr. Chen. Hello, everyone. I will go over our operational and financial highlights for the second quarter of 2025. Average daily active terminal, DAT, and average monthly active terminal, MAT are important operating metrics for us, as it measures customer usage trend over the period and is reflective of our business performance.

In the second quarter of 2025, average DATs were 317,957, of which, 18,863 owned by the company and 299,094 not owned by the company, representing an increase of 3.8% from 306,289 in the second quarter of 2024.

During the second quarter of 2025, 55.7% of DAT were from Ucloudlink 1.0 international data connectivity service, and 45.3% were from Ucloudlink 2.0 local data connectivity service. In June 2025, the average daily data usage per terminal was 1.59 gigabytes.

Average monthly active terminal, MAT, in the second quarter were 663,197, representing an increase of 5.6% from 628,125 in the second quarter of 2024. First, average MAT in the second quarter of GlocalMe IoT business was 42,095, representing an increase of 791% from 4,725 in the second quarter of 2024.

Average MAT in the second quarter from GlocalMe SIM business was 42,271, representing an increase of 120.1% from 19,208 in the second quarter of 2024. Third, average MAT in the third quarter from GlocalMe Life business was 2,633, representing an increase of 105.2% from 1,283 in the second quarter of 2024. Fourth, average MAT in the second quarter from GlocalMe mobile fixed broadband business was 576,198, representing a decrease of 4.4% from 602,909 in the second quarter of 2024.

As of June 30, 2025, the company had 183 patents, with 167 approved and 16 pending approval. The pool of SIM cards was from 391 mobile network operators globally as of June 30, 2025.

Total revenue for the second quarter of 2025 was $19.4 million, representing a decrease of 13.3% from $22.4 million in the same period of 2024. Revenue from service were $14.6 million in the second quarter of 2025, representing an increase of 3.3% from $14.2 million in the same period of 2024. Revenue from service contributed 75.5% of the total revenue during the second quarter of 2025, compared to 63.4% in the same period last year.

Geographically speaking, during second quarter 2025, Japan contributed 33.6%, Mainland China contributed 33.2%, North America contributed 15.3%, and other countries and regions contributed the remaining 17.9%; compared to 46.2%, 23.5%, 14.6% and 15.7%, respectively, in the same period 2024.

Our gross profit was $10.2 million in the second quarter of 2025, compared to $11 million in the same period of 2025. Overall gross margin in the second quarter of 2025 further rose to 52.8% from 49.2% in the same period 2024. The gross margin on service was 56.6% in the second quarter of 2025 compared to 60.3% in the same period 2024.

Excluding share-based compensations, total operating expenses were $10.1 million or 51.9% of total revenue in the second quarter of 2025 compared to $8.7 million or 39.1% of total revenue in the same period in 2024.

Net income in the second quarter of 2025 was $0.7 million compared to $2.2 million in the same period of 2024. Adjusted EBITDA was $1.4 million in the second quarter 2025 compared to $3.3 million in the same period 2024.

For the second quarter of 2025, we recorded operating cash outflow of $0.9 million compared to an operating cash inflow of $4.7 million in the same period of 2024. For the second quarter 2025, our capital expenditure was $0.2 million compared to $1.6 million in the same period 2024. We maintained a solid balance sheet with cash and cash equivalents, $30.2 million as of June 30, 2025, compared to $31.1 million as of March 31, 2025.

With that, operator, let's open up for Q&A.

(Operator Instructions)

Theodore O'Neill, Litchfield Hills Research.

My first question is about the GlocalMe ecosystem. You're seeing strong growth in the quarter. And I was wondering how much you expect that to continue in terms of growth.

I'll put some color first, and then the CEO has more comment on that. In the second quarter, as we just stated in this ER call, our three new business, GlocalMe IoT business and SIM business and also Life business, these three businesses showed strong and rapid growth in terms of average monthly active terminal. Even as the figure (inaudible) us, the IoT business, the MAT increased nearly 8 times on year-over-year basis. And the same MAT growth more than 100% compared with the same period last year. The Life business in terms of MAT growth 105% year-over-year basis.

Even the revenues generated from the three new businesses are small proportionately, but the growth trend is massive. So we expect the new businesses, IoT, SIM, and Life, will scale our use bases to a multimillion basis. So that give us the future strong growth potential to 10 million user bases in the next couple of years.

Yeah. I'll add some more comments about this. Because we put a lot of R&D resources in branding and marketing, investment in these three new products, we already have nearly more than one year. And for IoT, we already made investment here for three years. So we can see IoT part. So now go to a new stage, because we already finished the testing period with a major leader in the industry for IoT. Now it's starting to launch the product.

Now, we can see the faster growth from revenue side and MAT side because you can see some, for example, like the major matter, maybe every month, just active ones. So MAT can more reflect the IoT growth. So we can see now it's on the right track. And we believe the trend of every month, we can see the data is fast growing. So we believe IoT will be the first one to make positive profit. So after three years' investment. That's the first.

And second, from the SIM card, we already sold SIM cards, 300 pieces. So we get the experience. We know how to play the game in this industry. So in some travel, for example, like China travel to Hong Kong, travel to Macau, travel to Japan, we already go to the Tier 1 sector in this SIM card service in China. So now, we are more confident because we have a new product for eSIM TRIO, this innovative SIM card come up.

And we just launched end of June. I think, we'll do the promotion with the (inaudible) for the advertisement, so it gets a very fast growth as well.

Finally, you can see our GlocalMe Life product. Currently, the smaller revenue as we start to launch our GlocalMe Life product end of last year, it's for cable, it's our UniCord, it's a fourth product and along track. And in the end of second quarter, we have the second generation of the Life product come out like UniCord Plus; like this new UniCord Pro, this new product come out is more stronger capability, more high performance. It will win more market share.

But more important, I'll just emphasize, here is our platform product. The platform, we already finished many trials. And also, we try to improve our product better and better. We keep in our R&D, and we just let our product reach our requirement. So that's why we delayed the commercial launch. Our preview is we are supposed to launch in the second quarter. But now, we postponed August.

Middle of this August, we will launch (inaudible) of our platform. I think currently, the feedback and the trial is very positive for our new version. So we believe this will lead to fast growth after our heavy investing in the branding and the marketing. I just gave a brief about our three new product line growth. Although we have some impact from the tariff, as I mentioned, for tariff impact for our traditional products, but I think we can see the fast growth for new product.

And my last question is about sales of products were below expectations. And I was wondering if you could give us some more details on that. Was that tariff-related? Is it particular geographies?

Yes. I disclosed the earnings for the second quarter. Our quarter revenues is achieved below the guidance, $23 million. The main reason for this lower revenue achievements because the legacy mobile broadband business, the order from Japan was delayed, that was a couple of million US dollars. But this order will be placed in this quarter, the third quarter. This is the main reason for the second quarter's revenues achieved below the guidance.

And the second reasons, macroeconomics and trade headwinds that our sales in the US market have not reached the expectations. And so the major geography reasons is the Japan market's delayed orders. The second is the trade headwinds. So that little bit impacts our sales in US market.

Vivian Zhang, Diamond Equity Research.

So my question is regarding the company's upcoming products, such as the PetPhone. Do you think this upcoming product will be affected by the industry headwinds and result in lower-than-expected sales?

Because I think it's a new concept, a new innovation in the industry, we already have hundreds of pieces already in commercial trial. All the feedback is very positive. Also we adopt there some consumers' opinion that this product is more better and more, I think, competitive in the industry. So because it's a new product, new concept, currently, we can see the feedback from the users, feedback from investment, feedback from our channel, feedback from the mobile operator. All is very positive. I believe this product will be very successful.

And that's why we are very confident. We already have invested on R&D side. And also we will invest in the branding. So you can see from this month, we start to launch product. So in Hong Kong, US, and with big channel. We have 10 countries in our plan. Country by country, with our local big channel partner, we'll start to launch this product.

But we haven't placed a big forecast in our annual product revenue because, I believe this is from the concept, big volume needs two or three quarters. That's our current (inaudible). So the product, we haven't placed a big order here. But we believe in the future, this will bring us very successful product. We believe so, and our partner also believes so.

This concludes our Q&A session. I would like to turn the conference back to Mr. Gao for any closing remarks.

Okay. Thank you once again for joining us today. If you have further questions, please feel free to contact Ucloudlink's Investor Relations through the contact information provided on our website or speak to our Investor Relations firm, Christensen Advisory. We look forward to speaking to you all again on our next quarterly call. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.